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Arkansas lawmakers selected a consultant to conduct a study of rising property insurance premiums for public school districts and higher education institutions on Wednesday.
The Arkansas Legislative Council Executive Subcommittee listened to proposals from Cadence Insurance and Meadors, Adams & Lee Insurance Inc. before authorizing the Bureau of Legislative Research to enter into negotiations with the latter, who submitted a total maximum bid of $50,000.
Roberts Lee, president and CEO of the Little Rock-based Meadors, Adams & Lee Insurance, proposed a few solutions for controlling costs Wednesday, including grouping similar-size districts during the procurement process and easing participation and access requirements. Lee also suggested that the state fund a self-insured retention.
A self-insured retention is a dollar amount specified in a liability insurance policy that must be paid by the insured before the policy will respond to a loss, according to the International Risk Management Institute.
“The only way to keep this money and to control this money is to put it inside a state-funded self-insured retention that this program can operate off of because you don’t ever get money back from the insurance companies,” Lee said.
Insurance premiums are increasing nationwide, Education Week reports, because climate change is causing more frequent natural disasters that affect school operations and require insurance companies to pay out.
Ken Estes, senior vice president at Cadence Insurance, noted during his presentation that $122 million of the more than $147 million in losses experienced by the insurance program managed by the Arkansas School Boards Association is a result of the tornado that destroyed Wynne High School in March. This is the largest loss of any school district in Arkansas’ history, Estes said.
Arkansas school districts will see an average increase of 130% in insurance premiums this school year, according to the governor’s office. In July, Gov. Sarah Huckabee Sanders authorized the use of state funds to cover 30% of the cost increase.
ALC’s Performance Evaluation and Expenditure Review Subcommittee approved the $10.8 million transfer of funds to be split three ways — $6.3 million for the 170 districts in the program managed by the Arkansas School Boards Association, $4.46 million for the 68 districts in the Arkansas Public School Insurance Trust (which is managed by the Arkansas Insurance Department), and nearly $118,000 for the Bentonville School District, which procures insurance directly through the open market.
Arkansas Advocate is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Arkansas Advocate maintains editorial independence. This article was published with permission from the Arkansas Advocate. Contact Editor Sonny Albarado for questions: [email protected]. Follow Arkansas Advocate on Facebook and Twitter.